Shoemaker v. The National Mechanics' Bank. such suit is a case arising under a law of the United States, within the meaning of the Constitution, the bank being incorporated by a law of the United States; and it is competent for Congress to confer jurisdiction over it on the Federal courts. But the jurisdiction is expressly confined, by section 57, to suits brought in a Federal court held in the district where the association is established. Under it, however, these plaintiffs, a National bank, could bring a suit in this court against a National bank established in this district. The section embraces any plaintiff who has capacity to sue at all in any court. If these plaintiffs can sue another National bank in this court, it is difficult to see why they should not be allowed to sue in this court defendants who are citizens of New York. I can perceive no evidence, in the legislation referred to, that Congress intended that this court should not assume the jurisdiction invoked in this suit. So, too, the provision in section 2 of the act of July 27, 1868 (15 Stat. at Large, 227), withholding from banking corporations organized under a law of the United States, the privilege conferred by that act on other corporations organized under a law of the United States, of removing into a Federal court, certain suits brought against it, cannot be regarded as affecting the question of original jurisdiction involved. in this case. I am, therefore, satisfied that the averments of the bill are sufficient to show jurisdiction, and that this court has jurisdiction of this suit. On the merits, the plaintiffs are entitled to the receivership and the injunction asked for in their notice of motions, so far as concerns the property specified in the first and second clauses of such notice; but, inasmuch as such property exceeds the amount of the plaintiffs' claim, the receiverships and injunction will be discharged on furnishing to the plaintiffs satisfactory security for the payment of their claim, if they shall recover in the suit. An order will be settled on notice, embodying proper provisions. SHOEMAKER V. THE NATIONAL MECHANICS' BANK. (2 Abbott, U. S., 416.) Enjoining misapplication of funds by officers of a National bank- Loans in excess of one-tenth of capital — Loans on stock as collateral security. The Circuit Court has jurisdiction, at the suit of a stockholder, to enjoin the officers of a National bank from any misapplication of its funds which might Shoemaker v. The National Mechanics' Bank. result from any act not warranted by its charter, or which would amount to a breach of trust. A loan made to an individual or company by a National bank is not void because it is in excess of one-tenth of its capital stock paid in; and the money loaned may be recovered.* A National bank may lend money upon the personal obligation of the borrower secured by a pledge of stock of a corporation as collateral security. (Circuit Court, Fourth Circuit, District of Maryland, March, 1869.) GILES, J. This bill is not filed to have the charter of defendant, as a National bank, declared null and void for the causes mentioned in section 53 of the act to provide a National currency, etc., passed June 3, 1864. This would not be the appropriate proceeding for such a purpose. That could only be accomplished by a suit instituted by the Comptroller of the Currency. But this is a bill filed by one of the stockholders in the National Mechanics' Bank of this city, to restrain the president and directors of the said bank from pursuing a course which, he alleges, is in violation of the requirements of their charter under the said act, and by which they are wasting the assets of the said bank, to the loss and injury of the complainant and its other stockholders. Such being the object of the bill, if its allegations were admitted by the answer, or proved on final hearing to the satisfaction of the court, it would be its duty to restrain the officers of the said bank from any further misapplication of its funds which might result from any act not warranted by its charter, or which would amount to a breach of trust. This is clear from the decision of the Supreme Court in the case of Dodge v. Woolsey, 18 How. 341. In that case the court says: "It is now no longer doubted, either in England or the United States, that the courts of equity in both have jurisdiction over corporations, at the instance of one or more of their members, to apply preventive remedies by injunction to restrain those who administer them from doing acts which would amount to a violation of charter, or to prevent any misapplication of their capitals * See Union Gold Hill Mining Co. v. Rocky Mountain National Bank, ante, p. 151. Shoemaker v. The National Mechanics' Bank. or profits which might result in lessening the dividends of stockholders, or the value of their shares, as either may be protected by the franchise of a corporation, if the acts intended to be done create what is in the law denominated a breach of trust." The motion for this injunction has been heard on bill and answer; and the principle is now almost universally recognized, that, where the answer denies all the circumstances upon which the equity of the bill is founded, the court will refuse the writ of injunction. It becomes necessary, therefore, to carefully examine the bill and answer; the bill, that we may learn what are the facts which is sets forth, and on which claims the equitable interference of the court, and the answer, that we may see if these facts are admitted or denied. Now there are many things stated in the bill, and replied to in the answer, with which we have nothing to do, on this motion. Whether the loan to Bayne, by the defendant, was made under such circumstances as will render the officers who made it responsible to the stockholders for any loss the bank may incur therefrom, can only be answered when this case comes before the court on final hearing. And it may be doubtful whether such question could even be decided on the pleadings in this case; it would seem to require a bill to be filed against the officers who made the loan individually. This is a bill against the bank in its corporate capacity. The allegations on which the preliminary injunction is asked, are the following: "That in violation of said express prohibition, and in violation of the trust as aforesaid con fided to its officers, the said bank and its officers lent to Bayne and Bayne & Co., of the funds or capital of the said bank, from time to time, divers sums of money, in the whole largely exceeding onetenth of the capital stock of said bank actually paid in, and that for many months the amount of money so loaned exceeded three hundred thousand dollars." And it is further alleged that said loans were made upon collateral security of shares of stock, etc., some of which were spurious, and that among these were twelve hundred and fifty shares, purporting to be the stock of the Washington, Georgetown, and Alexandria Railroad Company, a corporation which the bill charged never had any legal existence, etc. And that said bank is joining in the prosecution of or has been made party to certain suits, touching or concerning the interests of said railroad company. Shoemaker v. The National Mechanics' Bank. It also charges that the said defendant, by its officers and agents, has offered to pay into the Circuit Court of the United States for the Eastern District of Virginia, the sum of twenty thousand dollars of the funds of said bank, in a cause therein depending, in which the said bank has no interest whatever, and to which it is not a party, and did actually pay in said cause two hundred dollars fees to commissioners, and did actually pay one hundred dollars to the trustees of Bayne & Co., upon some illegal and unauthorized agreement as to said securities taken by them from Bayne, and that they are negotiating for and offering to expend the money and funds of said bank in and about the repairs and reconstruction of the bridge of the said railroad company across the Potomac river, in which said bank has no sort of interest, and cannot legally have any. Said bridge, it is estimated, will cost over one hundred thousand dollars to repair it. And it concludes with a prayer that the said bank, its officers, agents, and attorneys, may be restrained from farther prosecuting or defending any one or more of said suits at the cost or charge, or in the name of said bank. The answer admits that Bayne & Co. did pledge with its cashier, early in the month of February, 1866, as collateral security for its money loaned and advanced to the said firm, one thousand two hundred and fifty shares of the capital stock of said railroad company, of the par value of one hundred dollars each, and that the trustees of Bayne & Co. did subsequently, for one hundred dollars, assign all the equity of redemption of said stock to the cashier of this defendant. It also admits that as a holder of stock of the said railroad company, it did agree with certain stockholders of said company to advance a portion of the sum of twenty thousand dollars, which was offered to be paid into the Circuit Court of the United States for the Eastern District of Virginia, in a cause in which the said railroad company and others were defendants, and Adams Express Company was complainant, to abide the decision of said cause, with the purpose of preventing the said railroad from passing into the hands of a receiver, to be appointed by said court, but said offer was refused by said court, and no money was paid on account thereof, and that this defendant was to have been adequately secured if said money had been actually advanced, and that it did advance about forty dollars, part of defendant's commissioner's Shoemaker v. The National Mechanics' Bank. fees, in said cause. And this defendant denies that it is negotiating or offering to expend its money or funds in the repair and reconstruction of the railroad bridge across the Potomac. It also denies that it, or any of its officers, at the time said stock was issued in the name of its cashier, or previous thereto, had any knowledge or good reason to believe that the said railroad company had no legal existence, or that the certificates were fraudulently issued, but that as late as May, 1866, the stock of the said railroad company was held and esteemed as valuable stock, at par or over par, and that as late as the middle of May, 1866, large loans were effected upon the pledge of its certificates of stock at or about par. Now, the only fact admitted in the answer, pertinent to the present inquiry, is that the defendant did receive from Bayne & Co. a pledge of the railroad stock as collateral security for loans made to said firm, and that said bank is now, in company with other stockholders of said railroad, engaged in suits, upon whose final decision depends the very existence of said road and the value of its stock. Will these facts warrant the granting of a preliminary injunction? Now the granting or refusing of an injunction is a matter resting in the sound discretion of a court of equity. It is one of the highest powers confided to a court of equity, and its exercise ought, therefore, to be guarded with extreme caution, and the remedy applied only in very clear cases. As to the first charge in this bill against the defendant, in reference to the amount loaned to Bayne & Co., in violation of section 29 of the act of Congress passed June 3, 1864 (under which act the defendant became a National bank), I would only say that the loan made under such circumstences is not void-it can be enforced as any other loan made by the bank. This I apprehend is clear, from the fact that section 29 provides no penalty for its violation, and section 53 of the same act, for all violations of the provisions of the said act, provides two penalties: first, a forfeiture of the privileges and franchises of the said bank, derived from the said act, to be adjudged in a suit brought for that purpose in the Federal court; and second, a personal liability by every officer of a bank who participated in or assented to such violation, for all damages which the bank may sustain in consequence thereof. Indeed, this clause was not pressed in the very able argument of the learned counsel who closed on behalf of complainant. The point so forcibly made by him was that the defendant was prohib |